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China: State-run Steel, Coal Firms to Cut 10 Percent of Capacity | ASHARQ AL-AWSAT English Archive 2005 -2017
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A villager is pictured as she selects coal at local businessman Sun Meng’s small coal depot near a coal mine of the state-owned Longmay Group on the outskirts of Jixi, in Heilongjiang province, China, October 23, 2015. Reuters

Shanghai-China’s central-government run steel and coal firms will cut capacity by around 10 percent in the coming two years, and by 15 percent by 2020, as part of their efforts to tackle gluts in the sectors, the state asset regulator said on Friday.

The State-Owned Assets Supervision and Administration Commission (SASAC) held a meeting with the 25 coal and steel firms under its jurisdiction at the end of June, it said.

The SASAC-run firms include China’s biggest coal producer, the Shenhua Group, as well as the Baoshan Iron and Steel Group (Baosteel) and the Wuhan Iron and Steel Group, which have recently announced plans to restructure.

China aims to cut 100-150 million tons of annual steel production capacity and 500 million tons of coal production capacity in the next three to five years, amid waning domestic demand and a long decline in prices.

Meanwhile, human resources vice minister Xin Changxing said China should slow down the pace of wage increases in order to maintain competitiveness.

Several Chinese provinces have slowed or halted rises to the minimum wage, as Chinese companies face pressure from rising expenses and weakening demand.

China should encourage labor-intensive factories to move from coastal areas to less developed western provinces, alongside efforts to update industries to spur productivity, he said.

The government is also looking to lower the social benefit cost burden on companies.

Lower wage growth could also help Chinese companies better compete with overseas low-cost centers for export orders.

Despite rising labor costs, China continued to gain global export market share last year.